SBA Revises Small Business Size Standards for 229 Industries
Government Contracts Update
Date: April 29, 2022
Under the Small Business Jobs Act of 2010, the SBA is required to review the existing size standards and make necessary adjustments to reflect current industry and market conditions every five years. This review is separate from the adjustment for inflation that the SBA is required to make to all receipts-based size standards, also every five years.
On March 31, 2022, the SBA issued four final rules that increased the small business size standards for a number of industries. As a result, many businesses will gain eligibility for federal small business assistance programs or retain eligibility for a longer period. These programs include SBA’s business loan programs, Economic Injury Disaster Loan (“EDIL”) program, and the federal procurement programs that provide targeted, set-aside opportunities for small businesses.
In addition to expanding access to SBA programs for approximately 59,000 additional firms, SBA estimates that the four final rules will create contracting opportunities estimated at $1 billion for 844 newly qualified small businesses. SBA will also extend Section 7(a) and 504 loans to newly qualified small businesses worth nearly $45 million. Because of continuing concerns about the COVID-19 pandemic’s impact on economic conditions, the SBA did not reduce any size standards. Each final rule will take effect as of May 2, 2022.
SBA Size Standard Increases
The SBA size standards are important – businesses that qualify as “small” under these size standards can gain access to many additional opportunities set aside for small businesses. The size standards are also important for businesses looking to qualify for Disadvantaged Business Enterprise (“DBE”) certification. To be a DBE, you must meet the SBA size standards for your primary industry code (i.e., your NAICS code).
The following is a summary of the changes that could affect certain businesses’ ability to compete for and win government contracts:
Agriculture, Forestry, Fishing and Hunting; Mining, Quarrying, and Oil and Gas Extraction; Utilities; Construction
SBA is increasing size standards for 68 industries in those sectors, including 58 industries and subindustries in Section 11 (Agriculture, Forestry, Fishing and Hunting); 3 industries in Section 21 (Mining, Quarrying, and Oil and Gas Extraction); 3 industries in Section 22 (Utilities); and 1 industry and 1 subindustry in Section 23 (Construction).
This final rule includes size standard increases of 50% or more for 54 of the 68 industries and increases of at least 20% for an additional 8 industries. For these 68 industries, the average size standard increase is more than $3 million.
It is also important to note that, while SBA considered reducing size standards in the construction industry, it left most of these the same to presumably avoid negative impacts on construction businesses and the government’s procurement activity under the Infrastructure Act that has already started to roll out.
Education Services; Health Care and Social Assistance; Arts, Entertainment and Recreation; Accommodation and Food Services; Other Services
SBA is increasing the size standards for 70 industries, including 14 in Section 61 (Education Services); 18 industries in Section 62 (Health Care and Social Assistance); 11 industries in Section 71 (Arts, Entertainment, and Recreation); and 4 industries in Section 72 (Accommodation and Food Services); and 23 industries in Section 81 (Other Services). One example is NAICS code 811213, Communication Equipment Repair and Maintenance, which is increasing from $12.0 up to $19.5 million.
This final rule includes size standard increases of 50% or more for 15 of the 70 industries and increases of at least 20% for an additional 23 industries. For these 70 industries, the average size standard increase is more than $3.5 million.
Professional, Scientific and Technical Services; Management of Companies and Enterprises; Administrative and Support and Waste Management and Remediation Services
SBA is increasing the size standards for 46 industries, including 27 industries in Sector 54 (Professional, Scientific and Technical Services), 2 industries in Sector 55 (Management of Companies and Enterprises), and 17 industries in Sector 56 (Administrative and Support and Waste Management and Remediation Services).
Within these categories, here are a few common NAICS codes that will see increases:
- NAICS 541310 (Architectural Services) from $8 million to $11 million
- NAICS 541330 (Engineering Services) from $16.5 million to $22.5 million
- NAICS 541611 (Administrative Management and General Management Consulting Services) from $16.5 million to $21.5 million
- NAICS 541612 (Human Resources Consulting Services) from $16.5 million to $25.5 million
- NAICS 541990 (All Other Professional, Scientific and Technical Services) from $16.5 million to $17 million
This final rule includes substantial size standard increases for many of the 46 industries. Accordingly, 16 of the 46 industries had a 50% or more size standard increase and increases of at least 20% for an additional 17 industries. For these 46 industries, the average size standard increase is more than $5.5 million.
Transportation and Warehousing; Information; Finance and Insurance; Real Estate and Rental and Leasing
SBA is increasing the size standards for 45 industries, including 18 industries in Sector 48-49 (Transportation and Warehousing), 8 industries in Sector 51 (Information), 10 industries in Sector 52 (Finance and Insurance), and 9 industries in Sector 53 (Real Estate and Rental and Leasing). One example in these categories is NAICS 531210 (Offices of Real Estate Agents and Brokers), which is increasing from $8 million to $13 million.
This final rule includes size standard increases of 50% or more for 19 of the 45 industries and increases of at least 20% for an additional 10 industries. For these 45 industries, the average size standard increase is more than $6.5 million.
While these increases will allow businesses to benefit from SBA’s procurement and loan programs, the increases will also significantly impact the small businesses in the 229 industries mentioned above. Many businesses that have recently outgrown their applicable size standard may qualify again as small businesses under the increased size standards. Current small businesses may be able to continue to qualify as small for longer periods under the increased size standards.
Additionally, as part of the ongoing review of size standards, in the coming months, SBA plans to issue additional rulemaking on size standards in Sector 42 (Wholesale Trade), Sector 44-45 (Retail Trade), and Section 31-33 (Manufacturing). We will continue to monitor developments and provide updates as they arise.
Given these significant rule changes, businesses should check their particular size standards related to their company and industry. While many size standards are staying the same, quite a few are increasing and could allow small businesses to either stay small for a longer period of time or to regain small business statuses. Many small businesses may need to review their strategic planning as a result of these changes.
FOR MORE INFORMATION
For more information, please contact:
Francis E. (Chip) Purcell, Jr.
Jessica V. Haire
Ryan S. Spiegel
Joseph R. Berger
This advisory bulletin may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgment of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel.
This document may be considered attorney advertising in some jurisdictions.
© 2022 THOMPSON HINE LLP. ALL RIGHTS RESERVED.